Palo Alto to reconsider minimum wage for tipped workers

Policy and Services Committee to discuss possible exemption for employees who get tips

Palo Alto's new minimum-wage law officially became a reality on Monday night, though in formally approving the new ordinance the City Council agreed to reconsider its application to tipped employees.

The decision to revisit the topic of whether the new $11-per-hour rate should apply to servers and other tipped workers was sparked by a last-minute push from the restaurant industry.

Owners of more than two dozen local restaurants signed a letter calling for the city to reconsider the minimum-wage law, which was initially approved last month and was scheduled to pass on a "second reading" (which is usually a formality) on Monday night.

The council agreed that the ordinance they passed in late August shouldn't be changed and it should apply to tipped and non-tipped employees alike. But members also committed to discussing the subject of tipped workers further and, if needed, to modify the ordinance at a later date.

Under the approved ordinance, Palo Alto's first local minimum wage is set to go into effect on Jan. 1, the same day that the state minimum wage is set to move up to $10 an hour. The council also agreed to explore plans for getting to a $15-per-hour minimum wage by 2018.

Jessica Lynam, director of government affairs for the California Restaurant Association, submitted a letter and addressed the council on the topic, urging council members to hold off on the wage increase. The letter noted that Cities Association of Santa Clara County had recently agreed to do a regional economic study on the topic and requested that all cities join the effort.

"Furthering a Minimum Wage proposal within the City of Palo Alto at this juncture will not benefit the community as a whole," the letter states. "The study will reflect the County of Santa Clara as a region and will dive deeply into many points that citizens within the community have asked the council during testimony to look into, such as exemptions and other impacts of the minimum wage."

Local business owners who expressed concerns about the new proposal included Laura Ekwall and Michael Ekwall, owners of La Bodeguita del Medio. Laura Ekwall read off a list of businesses with similar concerns, a group that includes St. Michael's Alley, Pizzeria Delfina, Old Pro, Sundance Steakhouse, Local Union 271 and Zola.

Michael Ekwall told the council that without the exemption, every penny of the minimum-wage increase will go directly to "some of our most highly compensated employees"  those whose wages are supplemented by tips."

"All our non-tipped employees already earn more than the proposed minimum wage and they will receive no benefit from the minimum-wage proposal," Ekwall said.

The council had already committed at a prior meeting to further consider exemptions in the ordinance for certain workers, including tipped employees and teenagers with seasonal jobs.

On Monday night, the council decided to pay specific attention to tipped workers and to have its Policy and Services Committee consider the topic in the near future.

While Councilmen Marc Berman and Cory Wolbach argued that the council should stay on its original course and consider tipped workers in the context of other exemptions, the majority agreed that these workers should get priority consideration.

Councilman Greg Scharff and Councilwoman Liz Kniss, who respectively made and seconded the motion to revisit the topic, said the proposal basically elevates the priority level of this discussion.

"It's the only group out there that's complained about it," Scharff said, referring to restaurant owners and their concerns about tipped workers. "I haven't seen any other group complaining about the wage increase."

Councilman Eric Filseth agreed.

"This one has priority," he said. "We have to deal with it forthwith."

After Wolbach's amendment to hew the original plan failed, the council voted 8-0 on Scharff's motion to send the subject of exemptions for tipped workers to its committee.

"An exemption all employees who might be eligible for a tip is a very terrible idea, but I look forward to discussing it in the future," Wolbach said.

Comments

15 people like this

Posted by tips
a resident of Barron Park
on Oct 21, 2015 at 11:04 am

Why not enforce the minimum wage for all Palo Alto employees, raise the price of restaurant items accordingly, and eliminating tipping?

Posted by George
a resident of Green Acres
on Oct 21, 2015 at 11:32 am

Now that new microchip- embedded credit cards are becoming the standard across the country, diners and bar patrons will have to make their tips known BEFORE their cards are swiped.

Gone will be the days of scrawling a hastily calculated tip on a receipt. Paying with a chip card will require customers to either tell servers a tip amount before a transaction is authorized or ask customers to key in a tip themselves if an establishment has a tableside checkout terminal.

Some restaurants may opt to eliminate tipping and raise prices accordingly.

Palo Alto, and America, will see how this shakes out over the next year or so.

Posted by Tipped out
a resident of Crescent Park
on Oct 21, 2015 at 12:33 pm

With minimum wages up, Obamacare available, Healthy SF surcharge, etc., I'm considering reducing tips to a few dollars for shuttling the order and food. The justification for 15%, 20% of a total bill just doesn't exist.

Posted by Joseph E. Davis
a resident of Woodside
on Oct 21, 2015 at 1:23 pm

Terrible policy - it's cruel to the low-skilled. Those people need a healthy supply of entry level jobs to gain experience in the work force. High minimum wages, benefits requirements, etc. reduce the supply of entry level jobs.

If you want to help the working poor, give them money. Don't make it illegal for some of them to work.

Posted by Mothernature
a resident of Downtown North
on Oct 21, 2015 at 2:12 pm

I can assume that many restaurant
ibject to increasing the minimum wage, but at the same time people who work in downtown Palo Alto are now required to pay for long-term parking, therefore the minimum wage increase would help offset the parking fees. Also, some restaurants such as NOLA are using Obama Care to add a percentage to the total bill, without first informing the patrons therefore these establishments should pay their employees the higher minimum wage as I am certain that they are able to afford it.

Posted by AdamH
a resident of Crescent Park
on Oct 21, 2015 at 3:27 pm

I thought the way it worked for tipped workers is that there was a floor if their average tips per shift didn't exceed the minimum wage (ie a very slow night) they were required to be paid the minimum. This is similar to how many sales people in companies receive a very low base salary but make it up big time in commissions. That seems like an easy solution. Doesn't make sense to boost their base just because and change all the logistics of how a crazy tipping system works.

Posted by Chip
a resident of Palo Alto High School
on Oct 21, 2015 at 3:48 pmChip is a registered user.

I'd rather pay more for the food & not tip at all. I dislike tipping 15-20% for meals including wine, since alcohol is already wildly overpriced. Many diners tip in cash & I don't believe all cash tips get reported as income. A server at one of our nice PA restaurants told me that his tips run $300+ per night on busy weekends and I think a lot of that is "tax free."

Posted by SteveU
a resident of Barron Park
on Oct 21, 2015 at 4:54 pmSteveU is a registered user.

Time for the USA to do away with 'tips' as part of the compensation like many other countries. Clean floors, restrooms are as important as the clean dishes the food is served on. Leave any of that out and you have a disastrous experience.

A tip should be reserved for unusual (over the top?) service, not the basic, everyday stuff. A restaurant without waitstaff is self service, with self service pricing. A car wash without the vehicle being clean at the end? That is their JOB if it is normal grime.

Sadly, it's hardly surprising to see a city council bow to well-financed special interests PACs like the California Restaurant Association. On Monday, we witnessed the same behavior in Mountain View during a study session on housing displacement.

Posted by Brianna Stubblefield
a resident of Midtown
on Oct 21, 2015 at 5:58 pm

I hope the Ekwall's are paying attention to what's going in re:tipping in other parts of the US restaurant biz.

Last week, Danny Meyer announced he'll eliminate tipping at all of his New York restaurants: Web Link

This is soon to be the new normal.

La Bodeguita (which already has relatively high prices) should plan for the day when they'll have to pay all of their staff directly and in full, and not rely on customer largesse to supplement worker pay.

Posted by Gale Johnson
a resident of Adobe-Meadow
on Oct 21, 2015 at 6:12 pm

I like that idea of no tips, but just add that cost into the prices on the menus. Then that puts the burden back onto the restaurant owners (where it should be) to figure that out...how much to add to their menu prices...but then that relieves us customers from having the tip angst/guilt trip to deal with. And that will make it much easier, as customers, to be able to sort it out and decide where we want to eat in the future. The total cost of eating out may be most important, but eating out with good food and service are also important.

Posted by Douglas Moran
a resident of Barron Park
on Oct 21, 2015 at 7:56 pmDouglas Moran is a registered user.

Process question: National and State minimum wage laws have long dealt with this issue (employees that are expected to receive significant amounts of income from tipping). Minimum wage laws have lots of complications (for various reasons: some rational, some political).

1. Why are the restaurant owners seemingly bringing it up now? Were they not consulted during the formulation? Was their input ignored? Did they fail to provide input when queried?

2. How was this not anticipated in the original version? Even if the restaurant owners failed to respond, there should have been awareness by Staff and Council that this was a potential difficulty.

Posted by Anonymous worker bee
a resident of another community
on Oct 21, 2015 at 8:27 pm

So these two guys come to our business and ask to talk to the manager. When I leave I ask him who they were. He says they were from a union. I think he said the union was called Unite Here, but I'm not sure about that because it doesn't sound like the name of a union. Anyway they said that our company could ignore the minimum wage law if we form a union. This doesn't make any sense because I thought unions were trying to raise wages. Is this even legal?

Posted by Slow Down
a resident of Community Center
on Oct 21, 2015 at 8:37 pmSlow Down is a registered user.

@Anonymous worker bee - you found out exactly why unions push for minimum wage, then exempt union employees. It is so they can go to non-union employers and say, allow unionization, and you get to pay lower wages. Employer wins, union now has more dues paying employees, so the union wins. You didn't think it was for the benefit of employees, did you?

Posted by Richard Pollak
a resident of Los Altos
on Oct 21, 2015 at 9:25 pm

I believe that California law forbids tip-sharing. The non-servers, e.g., busboys, dish-washers, kitchen staff, etc., make a comparative pittance.
That is the rationale for those restaurants which add a fee to the bill and abolish tipping.

Posted by PAmoderate
a resident of Old Palo Alto
on Oct 21, 2015 at 10:18 pmPAmoderate is a registered user.

Hilarious.

Restaurant margins are typically 3-6%. But of course, no one understands this on the city council. Not surprising for a knee-jerk reflexive liberal area.

In any case, restaurant service in 100x better here in the US because of tipping. All you need is for a reminder is to actually travel to other countries where tipping is not done and see how it really is.

Posted by Carla
a resident of Downtown North
on Oct 22, 2015 at 3:27 amCarla is a registered user.

Actually, the Freakonomics not only concluded that the practice of tipping is unfair; but that it should be illegal because it is highly discriminatory based on race, gender, age. The US forbids employers to set wages based on these parameters, but it allows the customers to set compensation based on this.

Posted by SteveU
a resident of Barron Park
on Oct 22, 2015 at 8:10 amSteveU is a registered user.

Richard
Title 351 allows tip pooling as long as it does not include owners or management in the pool. So a Dishwasher, busboy can be included, but the shift supervisor can not...even if they wait on you

Posted by Resident
a resident of Another Palo Alto neighborhood
on Oct 22, 2015 at 9:04 am

Contrary to what someone above said, I think European service is much better because they know they only get tipped for excellent service or by Americans so they tend to do well. However, their idea of good service is culturally different from here. Never in Europe will you hear "my name is __ and I will be your server today". Their idea is to be more discreet than the wait staff here and less intrusive to the dining experience of the customer. They will seldom clear plates until the whole party have finished a course and will try not to interfere in the conversation of the diners. Their idea is to "wait" rather than to "serve" and culturally there is a difference. In the same way, Europeans here think the service is much too brash, and they are often poor tippers because it is outside their cultural experience to expect to tip for service - regardless of whether it is good or bad.

It is so much fun playing Santa Claus. Let's just give away money. Sorry, the real world doesn't work that way. The extra money being paid has to come from somewhere. It is up the Santas in government to find out where it will come from.

@Worker Bee ... Why do you think council put the union exemption in the minimum wage ordinance? Because the council and the staff are controlled by the unions. That's why city salaries, benefits and pensions are shooting through the roof. Of council members are going to give their union buddies a break. They want the unions to help them in the next election. One hand washes the other. Meanwhile, if your boss agrees to have this union come in, you're not getting a raise.

Posted by rocco
a resident of Embarcadero Oaks/Leland
on Oct 23, 2015 at 3:46 pm

Tipping is going away, it's inevitable. It's the only way to mitigate the hue pay discrepancy between FOH and BOH....One day soon, all full service restaurants will dispense with tipping....Guaranteed.

Posted by anneke
a resident of Professorville
on Oct 24, 2015 at 9:35 am

Eating out is a "luxury" for my husband and me. Not because we cannot afford it, but because I love to cook and I can serve a number of great and healthy meals for $75. Hence, we visit only two favorite restaurants, a lovely Italian one and an excellent pizza place (since no matter how hard I try, I cannot make good pizza.)

So, we only go out if we want to celebrate a special occasion, such as our meeting day (45 years ago,) our wedding anniversary, a birthday, a visit from beloved family or friends from out-of-town. In both restaurants, we will easily give 20% to 25% tip on the total bill without taxes.

In The Netherlands, where I am from, the Government automatically includes a 15% service fee in the meal price (in addition to an 18% - 20% value added tax,) which I can support. However, in the past I found service in Dutch restaurants to be rather mediocre, as there seemed to be no incentive to provide good service. That has changed over the years, as the Dutch people began to add extra tips for servers who did well.

In this area of wealth, I do believe it would be good to include the server's portion in the meal prices, with room to add some extra tip. Good food and good service make your restaurant experience. They are completely interconnected.

I am always surprised when I see people nickel and dime the bill, only for a few extra dollars.

Posted by Marrol
a resident of Embarcadero Oaks/Leland
on Oct 24, 2015 at 8:00 pm

If government requires employers to increase employee salaries, which undoubtedly will lead to raising their prices, then I for one will no longer tip servers in Palo Alto. If the purpose of the ordinance is to provide servers with a livable wage, then they no longer need a gratuity.

Posted by Carla
a resident of Downtown North
on Oct 27, 2015 at 8:12 amCarla is a registered user.

So making it illegal is apparently non very enforceable, but it should be the owners/managers to delete it.
Again, tipping in the US inherently discriminatory which goes against the nature of our existing laws:Web Link